US President
Barack Obama
and Republican House Speaker John Boehner have edged closer to a deal to solve the fiscal cliff crisis and lock in long-term budget savings after a 45-minute White House meeting.

The two men moved to within $US200 billion of each other in their talks on new tax revenues, after a counter offer from the President in response to an earlier offer from Mr Boehner. The difference is a quarter of the gulf between Mr Obama’s opening demand of $US1.6 trillion in new revenues over a decade and Mr Boehner’s opening offer of $US800 billion.

The rapid momentum after weeks of stalemate is raising hopes that policymakers will avert the fiscal cliff – a mix of tax hikes and spending cuts that would pitch the economy into recession – by the December 31 deadline. Stocks surged in response, but Senate Democratic leader Harry Reid suggested the deal might not be made law until after Christmas.

Republicans, due to consider the President’s offer at a crucial House conference meeting, warned the two sides were still a way apart on taxes and other matters.

Mr Obama has agreed to drop his demand for new tax revenue to $US1.2 trillion and to accept matching spending cuts of $US1.2 trillion, including a slower formula for cost-of-living increases in social security payments, the Washington Post reported.

The tax demand would require rates to go up for households earnings more than $US400,000, instead of the $US250,000 figure originally sought by the President.

Mr Obama also wants more stimulus spending to boost the sluggish economy and a two-year extension of the $US16.4 trillion debt ceiling. The ceiling will be hit early next year, putting the US government at risk of default and credit downgrade.

But he did not offer to raise the eligibility age for Medicare to 67 from 65, as sought by Republicans.

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Mr Boehner’s office disputed that the cuts were “matching". “Any movement away from the unrealistic offers the President has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced," said Brendan Buck, a spokesman for Mr Boehner.

Mr Boehner raised his offer on new tax revenues to $US1 trillion on Friday, including higher rates on households earning more than $US1 million. But he is also seeking to slow the rate of increase in a range of federal benefits, such as Medicare and social security, by switching to a less generous measure of cost of living price increases known as “chained CPI". Such a move is opposed by many Democrats, for whom protecting the two programs is a fiercely guarded article of faith.

Mr Boehner is only prepared to offer a one-year extension of the debt deal and is seeking spending cuts roughly equal to the dollar value of the debt ceiling increase.

With the federal government expected to hit the current ceiling early next year, he would require much larger spending cuts from Mr Obama to justify the longer extension.

The White House said Mr Boehner’s latest proposal didn’t satisfy its demands. “The President’s proposal is the only proposal that we have seen that achieves the balance," White House spokesman Jay Carney said.